Micro-entities regime for limited companies

How to determine if a company is entitled to the micro-entities regime

• The company must be entitled to the small companies regime.

• The company must not be excluded from the micro-entities regime due to the nature of its business.

• If the micro-entity is a parent company, the group it heads must qualify as small.

• The company must qualify as a micro-entity by application of the size limits.

Exclusions from the micro-entities regime?

There are further exclusions from the micro-entities regime in addition to those from the small companies regime.

A company will be excluded if at any time during the financial year it was:

• an investment undertaking

• a credit institution

• a financial holding undertaking

• an insurance undertaking

• a charity

A company that is not a parent but whose accounts are included in consolidated group accounts is not entitled to apply the micro-entities regime in it is individual accounts.

If the micro-entity is a parent company, the group it heads must qualify as small

Parent companies only qualify as a micro-entity if they qualifies as a micro-entity individually and the group they head qualifies as small. Parent companies that prepare group accounts cannot qualify as a micro-entity.

If the parent is itself a subsidiary it is not necessary to consider any larger group it is part of.

In its first financial year a group qualifies as a small group if it meets the size limits in that financial year. After this the group needs to meet the size limits for two consecutive years to qualify as small.

Small groups – size criteria

The size limits are met if two out of the three of the following limits are met:

Turnover

Gross <= £12.2 million

Net <= £10.2 million

Balance sheet total

Gross <= £6.1 million

Net <= £5.1 million

Monthly average of employees

<= 50

The turnover limit is adjusted proportionately if the financial year is longer or shorter than twelve months.

The company must qualify as a micro-entity by application of the size limits.

The method to determine whether a company qualifies as a micro-entity based on its size is the same as above but with different thresholds.

Individual company – size criteria

The size limits are met if two out of the three of the following limits are met:

Turnover <= £632,000

Balance sheet total <= £316,000

Monthly average of employees <= 50

The turnover limit is adjusted proportionately if the financial year is longer or shorter than twelve months.